Global Change Agents

01/01/2014 | Gail Reitenbach, PhD

Now more than ever, the power generation business is a global business. Supply chains are more international than in the last century. Thanks to more easily retrievable reserves of shale gas, the prospect of increased liquefied natural gas exports from countries on six continents promises to shake up global fuel markets. Cyber crime knows no borders. Even human capital is subject to global dynamics—remote equipment monitoring can be managed a continent away, and skilled workers take temporary or permanent assignments wherever demand for their talents is strongest.

Responding to a Changing Industry

Even as many regions seek to source more energy locally, the technologies and services for both distributed and centralized generation—from American-designed boilers to Chinese-manufactured solar modules—are being provided by companies that conduct business globally. U.S. companies are participating in that trend, in part as a consequence of nearly flat load growth and limited opportunities for new project construction at home. As less-electrified nations, especially in Asia, have accelerated their economic development plans, the biggest markets for many companies in this industry, and some of the most interesting projects, now lie beyond North American borders.

Does that spell the decline of U.S.-based businesses serving the industry? Not necessarily. Shifts in economic growth from one nation to another are nothing new. Major players that have long been involved globally are simply looking abroad for a larger chunk of new business. Westinghouse, for example, in a November promotional release said it sees a promising future for nuclear energy in Brazil. Other companies may find themselves involved in new lines of business closer to home—perhaps more retrofit and upgrade work rather than new builds.

Do low demand growth and increased regulation in the U.S. mean domestic power plant workers have hit a career dead end? Not necessarily. Those willing to acquire new skills and, yes, maybe even move, should find jobs, especially given the overall aging industry workforce.

Global Fuel Dynamics

The shale revolution is typically acknowledged as the biggest near-term industry disruptor. Every nation with any reserves, it seems, is at least considering its options for developing shale gas. South Korea, for example, plans to mitigate its reliance on energy imports by focusing on the unconventional gas, and China is cautiously optimistic about development of its substantial shale reserves. Europe in particular has reason to hope that the evolving global gas market will break the linkage between natural gas and oil prices while increasing fuel diversity.

Though shale is the most obvious global change agent in the fuel arena, the escalating demand worldwide for coal-fired generation makes it imperative to use this resource in ways that address environmental, health, and climate change concerns. Europe has made arguably the fastest switch from coal to cleaner fuel sources—though not without some backtracking and higher-than-promised costs. But the story doesn’t end with Europe. To understand the need for improved coal combustion practices globally, you only need to look at the daunting challenge China faces with air pollution, especially during the winter heating season. Though coal-fired facilities providing heat and power are not solely responsible for air through which you cannot see the person next to you, they are certainly a major contributor in parts of China.

Growing economies are unlikely to abandon coal anytime soon. That means the global market opportunity for affordable and truly cleaner coal usage is huge. Of course it’s not a simple problem to solve—especially while also protecting other resources, like water. But that’s exactly where the best and brightest from all nations can contribute new solutions to a mature industry. After all, those shiny tech gadgets continue to depend upon electricity, and reliance on those gadgets is growing globally, along with standard of living improvements.

After the 2011 Fukushima disaster, it seemed that event would go down in history as a long-term negative change agent for nuclear generation globally. In Japan, recovery for the nuclear industry is proving very slow. But it appears that other nations are proceeding more or less according to previous agendas. Though several European nations, including the historically nuclear-heavy France, are holding firm to post-Fukushima nuclear pull-backs, the UK is moving forward with plans for new nuclear generation. In the U.S., the handful of unit shutdown announcements have been prompted by poor economics and equipment problems rather than fears about nuclear energy, and the development of small, modular reactors is making slow but deliberate progress.

Renewables will continue to have a disruptive effect disproportionate to the megawatt-hours generated. Adding large amounts of grid-integrated intermittent sources creates challenges both for countries like China that are faced with building new transmission infrastructure and those like the U.S., coping with some of the oldest lines. Wherever wind and solar power become significant contributors to the grid, the market for affordable, flexible technology solutions—from energy storage to hybrid generation schemes to smart grid–enabled demand response—presents an opportunity for new business.

Profiting from Global Change

In response to the changing market, POWER continues to expand its coverage of developments around the world while remaining committed to the industry’s success in North America, where, like them or not, new regulations present new business opportunities for some as they pose threats to others. This industry forecast issue offers insights into the levers of change not just in the U.S. but also in selected, key international markets.

Change is rarely easy, but it’s inevitable—even in the power industry—and it can be good for business. Whatever role you play in the global power generation industry, we wish you a happy, healthy, and prosperous New Year! ■

— Gail Reitenbach, PhD is editor of POWER. Follow her on Twitter @GailReit and the editorial team @POWERmagazine.

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